Drag-along Rights

Drag-along rights enable majority shareholders to “drag along” minority shareholder shares in an acquisition. This right is often negotiated by investors so that they can sell a company through a stock acquisition even when minority shareholders do not want to sell their shares. Founders, who are usually minority shareholders, may be resistant to granting these rights because they can can enable investors, who usually have a liquidation preference, to negotiate sales where the investors benefit and the minority shareholders do not.

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